Okay, great. So okay, great, thanks for
having me. So, my name's Tyler I'm the
CEO of Clever and what I want to talk today is
about sales. And I've a little bit of
insight into this I graduated college, I actually studied
math and statistics, probably like some
of you here in this room. And thought I was destined for
this world of, finance. I was about to go start at a
hedge fund. And at the last second, a
friend of mine roped me in to join his startup, and asked me
to do sales there, which was something that I knew nothing
about, and so, had to figure out on the fly, and
spent a couple of years there, figuring out sales for this
very early stage company. And then, when it came to
start Clever, you know, we started Clever, and I did
it with two co-founders who are very technical, and one
very product-oriented, and we wanted to build this
product for schools, and I thought that experience would
have no relevancy whatsoever. But it turns out that some of
the things that I picked up at the, this previous job, where
it was figuring out sales, have been huge parts of what's
made Clever grow so quickly today. Quick background on Clever, we
build software for schools. We are an app platform used by
developers and it's used today by about one
in five schools in America. And we started it about two
years ago. And so sales have been a be,
key piece of that, and I want to use this time to
just share some of the things that have worked
for me along the way. Of course, there's a million
ways to do this, so you'll find what works for
you. So first I want to start about
how most, how I used to perceive sales. And a lot of people see sales
as having this, you know, a lot of mystique around it. You know, it's people who are
you know, really articulate and
impossibly charming. And they have these, you know, killer closing lines that they
use. And I think this is how I saw
sales, and I think this is how a lot of founders I talked
to see sales, because they say things to me like, you know,
we're just going to work on the product and build a great
product, and then when it's finally finished we're
going to hire the salespeople. And what I've learned is that
hire the salespeople, as a founder, the reality is
that's you. And so you know, Paul Graham
likes to talk about how there's two things you should
be doing at any point in time when you're starting your
company. You're either talking to your
users or you're building your product. And that talking to your users
part, that's selling. And so. You know, this is intimidating
to some people because they're like, I've never done
sales, and I don't, wouldn't even know where to
begin. But it turns out that as a
founder, you have some unique
advantages that make it, possible for you to be really,
really good at sales. And one of those is your
passion for the product, and what you're
building. And the second is your
industry knowledge of what your, of the industry and the
problem that you're solving. And those two things actually
totally trump sales experience from what I've seen. So, this is actually my
cofounder, doing sales. This is what sales, looks like in the very early
stage of a startup. It's not Don Draper. It's a lot of calls like
these. But this is something that
even as a founder who's never done it
before, it's very easy to do, but you have to commit
yourself. And what we did at Clever was
we dedicated one founder, which was me, to peel off and
say, okay, Tyler you're going to go
figure this out and and work on this full time because it's
so important to our business. So, couple things that I've
picked up about sales along the way and in, in trying to
figure this out. You know, the first thing that
everybody knows about sales is they say, okay, it's a funnel. And you have these different
stages of funnels and you, of, of the funnel and you move
your customers through it. Pretty common categories. There's this prospecting
category where you're trying to figure out
who's even interested. Then you're having a lot of
conversations, which is the second level of
the funnel. Then you're finding out who's
really serious and you want to close them and
sign the deal. And then of course, you're in the promised land
of, of revenue. And what I thought would be
interesting would be to talk about each of the stage, a
couple strategies that we've used at Clever that
have, worked really well. So that these aren't abstract
things but things that, you know, you can
hopefully use at your startup. So, prospecting. So, prospecting is the process
of figuring out who will even
take your call. And you know, one of the
things that I realized early on, so there's
this guy Everett Rogers who, who's created this technology
life cycle adoption curve. And he describes it as bell
curve where you've got you know, your innovators and who
will try new things, and you've got your early
adopters, your mid-stage adopters, your
late adopters, your laggards. And one of the things that was
really helpful for me in understanding sales in
an early startup is he's quantified the tail of this
bell curve and this part over here, the innovators, those
are your potential customers. And it might seem discouraging
that only 2.5% of companies are your potential customers
that would even consider buying from a startup that has
no users and no revenue. But actually, I found just the
opposite. I found it to be extremely
helpful to have this frame of mind, because you realize,
when only 2.5% of companies will even take your call or
consider using your product, you realize what a numbers
game this becomes. So if you want to reach that
2.5% and you want to get some early
sales, you, you've, if you're starting to do math,
you're hopefully starting to realize you have to do a lot
of calling. You have to do, talk to a lot
of people. So early on in the early days
at Clever, this was my job. You know, in the, in the 2 months the first two
months of YC, I reached out to over 400
companies trying to get them to take a call and and talk to
us about what we're building. There's, there's three ways
that I have found most successful in,
in prospecting and getting these people, one is
your personal network. That's obvious. I'm not going to spend any
time there. Another one is conferences, which is surprising to a lot
of people, and then the one that people are most familiar
with is cold email. And when I say conferences,
this is what people think. They think I'm talking about
CES or, you know, E3 or something. And actually, the kind of conferences where sales happen
look more like this. And we've got, we would in the
early days would go to a lot of these because you've got to
where your users are. And if they're, if you're
selling to CIOs and there happens to be a gathering of
them at a hotel in Milwaukee, guess what, that's probably
where you should be. So we go to conferences like
these. We get the attendee lists in
advance. We email every single person
in advance, and, and try and set up meetings so that when
we get there, every single minute of that
trip was, was well spent. And this was huge in Clever's
early days. These, this was where we met
all of our earliest customers. The second thing I mentioned
is cold email. A lot of people don't know how
to write cold emails. It's actually really easy, and
the key is not to write a lot. Should be really concise. This is an email template that
I used early on and you're welcome to copy it, but
it's really short. Here's who I am, here's what
I'm building, and I'd love to talk to you about
this. Could we find time tomorrow? It's really easy and, and you
can customize this and find out for every business you want to
sell to who's the right person to send it to and you can send
out quite a few of these. So all right, that's
prospecting. And the reason this is so
important is because you've gotta build that first layer
of the funnel. Then you get them to take your
call. And this is another place
where a lot of founders I think just have a
lot of questions about what to
actually do. And the biggest thing to take
away, in fact if you only take away
one thing from this presentation today, the number
one thing you should remember is when you get them on the
phone, remember to shut up. And that's really surprising
to people. So many founders, when I help
them with their first sales pitch, they
finally get somebody on the phone who wants to talk to
them about their product. And they're so proud of this
thing they've been building for the last three
months that all they want to do is get on the phone and
talk about every feature and talk about all the different
things they can do and talk about why it's the
greatest thing in the world. And I have that temptation
too. It's just part of being really
proud of something. But it turns out that if you
watch the best salespeople, like the best salespeople in
the world, the top 1%. And you have a chance to
listen in on a call with some of those people, like I have, the most surprising thing is
how little talking they do. In fact, I've seen calls where
the, where the salesperson told me
their goal was to only spend 30% of the call
talking, and have 70% of the call the other
person. And they would ask a lot of
questions. They'd say things like, why did you even agree to take
my call today? This problem that we're
talking about solving for you, how do you solve it today? You know, what would your
ideal solution look like? And they're not, they're not
doing the talking. They're finding, they're doing
everything they can to find out what this person needs,
and hopefully understand their problem even better than they
do. That's what really great sales
is and in fact this is something I, I, I, I drill
into everybody at Clever. It's a really important part
of sales and there's actually now if any of
you use Uber Conference, they have this amazing feature
where when you hang up a call it sends you an email
automatically and tells you how much you talked versus how
much the other person talked. And looking at one of those
emails you know, if someone doing sales at
Clever, I get one of those emails, I can tell immediately
how likely the sale is based on how much talking we
were doing. So, you got all these people,
now you got on the phone, do a lot of listening, really
understand their problem. And then the other part of
this stage that surprises a lot of people is follow up. So here's a lot of different
steps that you can imagine going through. You know, emailing somebody,
not getting a response, and emailing them back. Calling them, leaving a voice
mail, having a pricing call. You know, there's probably
like you know, 60 things up here on this
slide that could be steps for closing a deal. These actually aren't just
random things, this is one deal that, this was the second deal
Clever ever signed. These are all the different
steps that we had to in order to get this done. And you can see there's a lot
of really embarrassing things up there like I emailed
somebody and they didn't respond and I emailed them
again and they didn't respond. And then I emailed them again
and this is from somebody who
wanted to buy our product. Isn't that crazy? Ana that surprises a lot of
people. I see so many founders today
have a great call with someone, they send an email,
they dont hear back and they say, oh that person might
not be interested. well, guess what, this is what it looks like in
the best case and. And so you really have to have
kind of, this unhuman, unreasonable
willingness to follow up, and drive things to closure. Now, qualify with that with
one thing. Which is to say, when you're
starting a company, your time is extremely
valuable. because it's your only
resource. And, and you couldn't possibly
do this for every single person who might
buy your product. So your goal should be to get
people to a yes or a no, as quickly as you can. Where you die is if you have a
thousand maybes. And sometimes I talk to
founders who say oh, yeah, I have this great pipeline of
you know, a hundred people who are, who have expressed
interest in our product. And the maybes are what kill
you. If you can get to a yes or a no, in some ways a no is, is
even better than a maybe. Because it allows you to move
on and focus on somebody who might be
a yes. So, have this super-human
level of, of follow up and ambition. But make sure you're focusing
it on the right pieces. All right. So you've talked to someone, you've talked to a ton of
people. You've had all these phone
calls. You've followed up with them
ridiculously. To the point where they, they just know you're not
going away, and they've gotta sign an
agreement. This final step is something
that, if you haven't done before, it
might seem opaque, but it's actually really simple. It's called redlining. So you'll send over an
agreement. Their lawyers will mark it up. Your Lawyers will mark it up
and you kind of go back and forth. If you're part of YC, this is
really easy because YC has standard template
agreements that they give you. So you don't have to find
these and you can just you know, use
those. But they've never been
available, you know, if you weren't part of YC you
kind of had to figure this out on your own. One of the things that I'm
really excited about is, as part of this presentation, YC has agreed to open source
their deal documents. So these documents that YC
founders used to get are now going to be
available to everybody. So this should never,
hopefully, never be a barrier to anyone
who wants to do sales for their start up. You've got some great
documents. And then the other thing I'll
say about this, a place I see so many smart,
smart people go wrong, is you gotta remember what
your goal is. Your goal is to sign some
deals, and get some reference customers,
and get some validation and get
some revenue. That, if you don't do that, your start up is, is, you
know, toast. So in light of that, it's
really surprising how many smart people will want to do
ten rounds of document review. Quibbling over the most minor
points because of pride, because of intelligence,
whatever. You know, make sure the
agreement is the way you want it, but then sign it
and move on. I've seen founders spend
months quibbling over some indemnification clauses. And their business would have
been way better off if they'd you know, just signed the deal
and moved onto the next one. So, that's one closing trap
you can fall into. I've two more. One other closing trap that I
see founders struggle with a lot, is they're talking to a
company who says, I will use your product, but I
just need one more feature. You know?
Or they say you know, I'd love to
use your product but it doesn't have this one
feature so we're just not ready. And to most people, especially
if you're ambitious, when somebody says that to you
what you want to hear is, oh, well I can build that feature. Great.
You know, I'll build that feature and then they're going to use my
product. But the problem is, it almost
never works that way. In fact, somebody telling you
that they would use your, they want to use your product
but it's just missing this one
feature. I would almost map that to a
pass in your mind. Because nine times out of ten if you actually build that
feature. You go back to them and then there'd be one more
feature, or there'd be some other reason that they're
not using the product. So, if somebody says to you
hey, I want to, but, you know, there's this one thing that's
preventing us from using your product. I would do one of two things. One say, well that's great. Let's sign an agreement. And we'll put in the agreement that we're
going to build this feature. In which case, you know, you know that if you build it
you're off to the races. Or more commonly, what we did at Clever was we
would say, that's great. We're going to wait to see if we hear that demand from more
customers. And then once you have a lot
of customers requesting it, then you should build it
regardless. And then, and then you're not, you don't have to worry about
doing something that's customer one-off, which is
what you really want to avoid. So, don't fall into this trap,
it happens all the time. And the other trap I would
highly, highly recommend you try to
avoid is the free trial trap. Because this hap, happens all
the time. People, you know, they go down
this path with a, with a customer, it seems
really exciting. And then the customer says,
oh, well can I get a free trial? And you can't blame them. That's a totally reasonable
thing to ask for. But the problem is, when you're starting a start
up you need revenue, you need validation, you need
users, you need commitment. And free trials get you none
of those things. So you go, you do all this
work, and if you end up with a free
trial, unfortunately, you haven't
made as much progress as you. It's actually terrible. You, you think you've made
progress. But really, at the end of the
free trial, you're going to have to sell
them all over again. So the way I handle this that
has worked really well, is when somebody says, can I
get a free trial? You say, well we don't, we
don't do free trials. But what we can do is we're
going to, we do annual agreements here. And what we'll do is for the
first 30 or 60 days, if for any reason you're not happy,
you can opt out. And that's a way to get you
the things that you need, while giving them the comfort
that they might need to take a chance on a start up. So that minor change is
actually makes a night and day difference when you're, when you're thinking about
these things. All right.
So, you've prospected. You've had a lot of
conversations. Now you've closed people. You've gone through the
redline process. You worked out the free
trials. And you're on your way, hopefully, to your first
sales. Now early on, you could think
of sales as just like any other
thing of a start up. Your goal is to, you don't
have to do things that scale. In fact you can purposely do
unscalable things to try and get early customers. That's, that's the fun of it. But the other thing that I
think is really important to keep in mind is, once you've
done this enough. What you should start thinking
about is, well what aspects of this are
repeatable? And, and what aspects of this,
you know, are we going to scale further? And there's this, Cristoph Janz has this really
great blog post online about the five ways to build a $100
million company. And he talks about, he can
have a thousand customers buy a product that costs $100,000. Or he can have 10,000
customers buy a product that costs $10,000. Or he can have 100,000
customers buy a product that costs $1,000. And even though you don't need
to know on day one, which bucket you're going to
fall into. Most companies do fall into
one of these buckets. And so, you should start
thinking about that as you're doing this. If, if you want to be in the
elephant category of $100,000 product, that's
great. And you're going to have a
really high touch sale cycle, and that's fine. You know, that's sales force. That's work day, that's great. But if you think you're
going to be a rabbit, and sell products for $1,000 a
year to businesses. And your sales process
involves flying out to see them three times and
eight demos and, and you know, three months of redlining. Then you probably have to
rethink something. And so I see a lot of startups
most commonly in that, who want to be the rabbits. And sell for a low priced
product to businesses, not thinking about how to do
it in a scalable way. And that's one area where you
can get underwater. Or it just forces you to
increase your prices. So this is how I think about
different businesses. And it'll be helpful for you
when, once so you can get started,
and once you've done enough of the
sales to say, okay. You know, where am I? And the corollary to that is,
is, how do I have to price my product, to
be a viable business? So that is, those are some of
the things that I figured out along the way building,
building sales now at a few, at a few different companies. And specifically on this very
narrow stage of, of zero to 1 million. After you get to 1 million, you'll find there's a million
blog posts, you know, about how to get from 5
million to 50 million. Or 10 million to 100 million. But this zero to one step, I
wanted to ded, focus the presentation on that
today. Because there's not as much
written about it and it is something that I think is very
opaque to a lot of founders. I figured this out just by
doing it. And I'm confident that if
you're starting a company, you can too. If for whatever reason you
would like to do what I did and join a startup that's
figured it out and, and hone your skills and hone
your craft. We are hiring at Clever, so
that's an option. >> But even if, and if that
doesn't, if you do want to start your
own company, and you have questions about
sales, I put my e-mail address up
here. And feel free to reach out at
any time, I'm happy to help. So, thank you. >> Thank you very much. >> Yeah.
>> That was awesome. All right.
So now, we're going to talk about a little bit more detail
on how to raise money. Michael Seibel is first going
to talk about how to have a pitch. And then Dalton and Qasar will
do investor role playing. >> Yeah, sure. My name is. Mind blowingly you know, new. It really is basic blocking
attack. And the one point I wanted to
make before we get started is, we actually don't spend a lot
of time at YC focusing on this. The main reason is, the best
way you can make your pitch better is to
improve your company. If you're, if you have
traction and your product is doing well,
these conversations are like, the investors want to see you
succeed. And so, if you remember
anything, it's make your company better
and the pitch will be easier. We're going to spend the time
in the three kind of sections before the meeting, which
Michael will kind of focus on. We'll do a kind of, a role play of what meeting's
actually look like. And then we'll just wrap it
up. We are going to do Q&A at the
end, we'll kind of save five
minutes. So if there's something we
don't cover, please write down your
questions and we'll go through them. Now, without further ado. >> Beautiful. >> All right. >> So, my name is Michael
Seibel. I'm a current YC partner. I've started two companies. One was called Justin TV. It ended up selling to Amazon. The other was called
SocialCam, which sold to Auto Desk. And what I really wanted to do
was break down and demystifying the process of
creating a pitch. Because I think what happens
too often, when I see companies come to
talk to me, is that they don't know how to
simply explain what they do, and then ask for money. And that's basically what you
have to do as a founder. So we're going to go over four
things. The first is what your 30
second pitch is. This you need to be armed with
constantly. This is basically, how you
talk about your company. This is magic. Whether you're talking to
people who want to give you money or don't want to give
you money. You're talking to your
parents. This is your go to. The second is your two minute
pitch. This is for people who are
more interested. This is people who you might
want to raise money from. Or people who you might want
to get to work for you, or people you actually. Kind need to get a little bit
deeper. Notice that's where I stop. A lot of people practice 10,
30 minute pitches, hour pitches, I think that's
all garbage. I think you can get everything
you need done in two minutes. And one thing I like to tell
founders is the more you talk, the more you have the
opportunity to say something that people
don't like. So just talk less and it'll
probably be better. So, then I want to tell you
about when to fund raise, because I think a lot of companies get this a little
bit wrong. And then, quickly, how to set
up investor meetings. So, 30 second pitch, this is
so simple, it's three sentences. You can take your time, you
can breathe when you do this, you don't have to get that
much information out. The first is one sentence on
what does your company do. Everyone I meet for the first
time screws this up. You have to be able to do it
in a way that is simple and straightforward, that requires
no pre-information on my part. You have to assume I know
nothing, literally nothing, about anything. This is how you make it super
simple. So you know, usually what we tell people is apply the mom
test. If in one sentence you cannot
tell your mom what you do, then rework the sentence. There is a one sentence
explanation that your mom, or your dad is going to
understand. So really, really start there,
and it's okay if you use really
basic language. It's okay if you're saying hey
we're Air B and B, and we allow you to rent out
the extra room in your house. That's simple, right? You don't have to say we're
Air B and B and we're a marketplace for
space. I don't know what that is. And it's going to require more
time. So use simple language. Very, very important. The second is how big is your
market? It makes sense to do a couple
hours of research. Figure out what general
industry your product is in. Figure out how big it is. Investors like to hear that you're in a
multibillion dollar market. It's pretty simple to do this. You know, Air B and B might say, how big is the
hotel market? How big is the vacation rental
market? How big is the online hotel
booking market? These are simple numbers to
look up on Google. And it makes an investor
understand, oh wait, if we're big, if we really
blow this company up, it can be worth billions of
dollars. Don't skip this step. Second sentence, how big is
your market? Third sentence, how much
traction do you have? Ideally this sentence is
saying something on the order of, we launched in
January and we're growing 30% month over
month. We have this number of sales,
this amount of revenue, this number of users. Very simple. If you can't speak to traction
in terms of pre-launch, you need to
convince the investor that you're moving extremely
quickly. So, the team started working
in January, by March, we launched a beta, by April,
we launched our product. Right? Convince the investors that
you guys are moving fast. That this isn't some long slog
that you guys aren't thinking about this like a big
cooperation. Your thinking about it like a startup where you can
move fast and make mistakes. That's all you have to do in
30 seconds. Three sentences. From that basis you should be
able to start a conversation about
your company. From that basis I understand
exactly what you do. You have no unders, you have
no idea how valuable it is to be able to explain to someone
what you do in 30 seconds, so really internalize that. Like if you take nothing else
away, that's going to help you. Okay. Two minute pitch. Now you've got someone you
actually have to convince of something. Maybe even someone you have to
ask for money. So, I like to add four
additional components and these also go by very quick. The first is unique insight. Now, if you talk to VCs
they'll say stuff like, what's your secret sauce, what's your
competitive advantage, what's your unique insight? It's all the same thing. When I think about unique
insight, what I think about is here's
your opportunity to tell me something that I don't know. Here's your opportunity to
tell me something that the biggest
players in the market you're trying to enter don't
understand or don't do well. This is the ah-ha moment. And you'd better have it down
in two sentences. The ah-ha moment. So you've gotta crystallize
all of the reasons why you guys are going to kill the
competitors, or the really intelligent thought that got
this business started. In two sentences, and I need
to ah-ha. You can see whether it's happening when you're saying
it. That's why I like two
sentences, so you get in and out fast. So if I look at you and I'm
like huh. Then it's okay, you've nailed
it. If I look at you and I'm like, I already knew that,
then you didn't nail it. If I looked at you and I just don't understand what
you're talking about, you definitely didn't nail it. So, practice that unique
insight. In your two minute pitch,
that's all, you're only going to get two sentences to
get that out there, so it can't be complicated, and
that's basically the theme of this whole thing right, it
cannot be complicated. Next, how do you make money? You know, your business model. I see so many founders run
away from this question because they think things
like, if I say advertising, people are going to be like,
oh, that's stupid. Just say it. Don't run away. If it's advertising, say
advertising. Facebook's a massive
advertising business. So is Google. If it's direct sales, it's
direct sales. If it's you know, a game and you're selling in-app in-app
add ups, like that's fine. Just say it. Don't run away from this
sentence. It only has to be one sentence
long. Where founders get tricked on
how will you make money is, they say, well, we're going to
run advertising, maybe some virtual goods, we're going to
figure out how to do this, and maybe this, and maybe this. Well, now you're saying
nothing. Now you've told me you have no
idea how you want to monetize this. This was a checkmark that I
just wanted to write, oh, they know how they're going to
monetize. Instead, I'm writing a big
question mark. So, do the thing that everyone
else in your industry does to monetize 95% of the time. Say it and move on. Like, it's totally okay, no one's going to hold your
feet to the fire and say three years later, you
didn't monetize this way. But it's much better to be
clear and concise than it is to start
spouting out every single way your company can make money. The next one is team. I think that this answer is
actually really clear. I think you're trying to do
two things. If your team has done
something particularly impressive, you
need to call that out. We were the founders of
PayPal, probably want to say that. We were the founders of
Amazon, might, probably want to say that. So if you guys have done
something that has made investors money, you want
to say that. If not, then please don't go
on about the awards your team has won, or the PhDs or the I
don't care, I don't care. What we want to hear is how
many founders. Hopefully between two and
four. What we want to hear is how
many of them are technical. How many engineers versus
business people? Hopefully it's 50 50 or more
engineers. We want to hear is that how
long have you guys known each other. We don't want to hear you guys
met at a founders' dating event three
days ago. ideally, you've known each
other either personally or professionally for at least
six months. We want to hear is that you're
all working full-time. It's really helpful, we're all
committed to this business. And what we want to hear is
how you met. That's it. You can get in and out of that
two sentences very easy. Your only way to build
credentials is if you've accomplished something. And with an investor typically
it's if you've accomplished something that's
made someone some money. So don't try to overinflate
yourself if you don't have that stat on
your resume, move on. The more you talk about a bad
thing, the worse it looks. So, the last one is the big
ask. When it comes to this and you
have to figure out whether this is a conversation
involves fundraising or not. What I tell people is like
this is the time where you kind of have to know what
you're talking about. This is a time where you have
to know, are you raising on a
convertible note? Are you raising on a safe? You have to know what the cap
of that safe is. You have to know how much
money you're raising. You have to know what the
minimum check size is. These are things where if you
don't know these these things, investors going to be like, oh
these guys aren't serious, or they haven't done their
homework. So whereas in the rest of this whole thing you shouldn't
use any jargon. In this part you shouldn't
just be like, oh, we're just raising some money. Like now it's time to actually use a little bit of
that jargon. If you don't know that jargon,
Google search it, like, it's real simple. You guys will learn it fast. So, that's it by the way. That's too, that's all your
pitch. Done, like, game over. Now you let them talk. So, when to fundraise. I think this is so important. Right, you've got this little
Growth graph here. Investors like to invest based
on traction. And so literally it's always
better to raise money when you've got more traction than
less. Often times though, you guys'll be in a situation
where you're just starting. Or maybe you just launched. So what you need to do is you
need to think about how do you flip the equation? Your entire mindset should be, typically you are the ones
asking investors for money and therefore they are
strong and you're weak. How do you create a scenario, where you are strong and they
are weak? Right? That's where you want to be
fundraising. So first, how do you know that
you're strong? If investors are asking you to
give you money, you're strong. That might be a good time to
start fundraising. If investors aren't asking
about giving you money, are you talking to people
about your startup? Or are you running super
stealth. If you're talking to people
about your startup and you're getting the word out, either that's through the
press or just through talking to your
friends or people you know doing
startups, that's a good way to kind of
start feeding that. The second thing is have you
created a plan so that you can launch and grow without needing to raise
a bunch of money. 95% of the startups that I
meet can get a product to market with a very, very
little bit of money. So never put the investor in the ultimate
position of power. We can't do anything until you
give us money. You always want to flip it
around. You always want it to be, this
things moving, we all left our jobs, we're
all working full time. And it's moving, if you want
to jump on great, if not. There are a lot of angel
investors. That's the attitude you
want to have. That's the confidence you
want to have. If you need money early,
always plan for needing less money. And always be able to show
that you've got a fully committed
team that's working fast. That's going to be how you gain an advantage when
you can't show traction. If you can show that investor
that you haven't launched yet, but you've done eight months
of work in one month, or two months. That you've got a great team
that have all quit their jobs and they're totally committed. You get some of that advantage
back. But you don't get all of the advantage unless you're
launched and growing. So something to keep in mind. Finally, how to set up
investor meetings. This is really, really simple,
but I'm surprised at how many companies don't get
this right. The first is you want a warm
introduction from another entrepreneur, preferably, or a
previous investor of yours. That's where you want to
start. If someone who has passed on
your company as an investor offers you, to
make introductions, that's kryptonite. Don't touch that. So first, warm introduction. Very simple, you don't want to
cold call these people, you don't want to bum rush
these people, the person, the credibility of the person
who's introducing you to an investor is a big part on whether the investor will take
that meeting. Second, think in parallel. So many people that I meet
will run the fundraising this super slow process, we met
with one guy this week, we're going to schedule a
meeting with another guy next week, another
guy three weeks from now. When you're fundraising you're
on. It's a sprint, it's not a
marathon. So you want to schedule all of your meetings during the same
week. It's extremely hard to do, but
here's one trick that I love. Tell when you're emailing
investors, you're getting those warm
intros, the investors email you back. You say, hey, we'd love to set
up a meeting but we're building like crazy for
the next two weeks. So can we set it up in that
third week? Right? So then, you've, I've e-mailed
every one that, right? So every one schedules that
meeting three weeks out. It's better for them because
their calendar's open. It's better for you because
you've got all your meetings in one week. And also, what did you do? You hinted, hey, I'm not
desperate for the money. We're building. Like, I could meet you in
three weeks. But we're building. We're busy. Like, it's signalling all of
the right things. So that's the best way to
kind of go about how you're going to do that. The last thing is one team
member should be invested in fundraising full time. It shouldn't be something that
takes over the whole company, because it's very, very
distracting. So with that, let's kick it
off to the next part of this. Who am I handing it to? Big Dalton. Yeah, that might. Oh, beautiful.
All right. Hi my name is Dalton Caldwell
I'm one of the. Camera can get us here, okay. Yeah, I'm one of the partners
at YC and one of the things that we're going to do today
real quick is a mock pitch. And first of all I know this
is a bit contrived but this is in this format of like
a college class, we're going to do our best to,
to have fun and kind of demonstrate what it's
like. And I realize there's a
million reasons why this, why you could say, oh this
isn't realistic of what pitch is really like but you know,
again, there's, there's a lot. Yeah.
That we can show you. Just in terms of my background
over my career, I've raised 85 million over
several companies, so I've sat in a lot of investor
meetings. And so, I'm going to be pulling as many things as I
can. So again, we're just going to
try to show you something to talk to, and use
it as a learning session. And you already did your intro
earlier Caspar, right? It's yeah I've, I mean, I've
done a couple startups. Cool.
Yeah, yeah, yeah. So we're going to do two
pitches, and we're going to go through them
pretty fast. And as, as Michael said, these
tend to go fast. So let's go dive into the
first one. Okay, so so Caspar, I
understand you, you're coming to pitch me to, can, what can
you tell me about what you do? So we're building a
communication platform that will allow you know,
businesses and consumers to collaborate on one single
platform rather than the kind of fractured state
that they're in right now. and.
I don't know, I, I don't follow. So, like think about like what
like WhatsApp or Snapchat that's for consumers. We want to do that for
businesses. and, and so, what the. I have to do this with a
straight face. What, what that what that
means is we want to enable consumers to talk to
businesses. And that's really, what really
the goal of our business, of our startup business. I still don't, so, who uses
this, what does this product do? so, I mean, it, it. It's for consumers and businesses, a messaging
product. a, it allows consumers to
send. Why, why would, why would a consumer want to
use your product? Because they want to message a
business. okay.
well, okay, what can you tell me about
the, the market or what the opport,
what's the size of this. How is this coming together? Well, I mean. Messaging companies are very
big. Obviously Whats App sold for
like $19 billion and Snap Chat is like really growing very
quickly as well so we, I mean we think the
opportunity is very big. Okay ,.
So, okay. Okay, could you tell me a
little about your traction, your numbers. Like, have you, have you given
this to people yet. yeah, I mean we don't want to
kind of open the Komodo and kind of go into all the
details here. I, kind of at a high level. We're live. We definitely have thousands
of users in the Bay area. Hundred of business, you know,
have kind of. Can you tell me who some of
those businesses are? There's ones that you've been
to. We don't, we don't really
want to get too much into the details, because, you
know, we're still early and we don't want, you know, we're
trying to stay stealth. Okay, well, can you tell me
about what you've learned so far, what insights you've had
from. Yes.
The consumers are sending messages to these businesses,
and we think that's great. so, and these businesses are
responding to the messages, and we think that's, you know, I don't think that's obvious
that that would happen. So, can you tell me about what
your business model is, and how. Yeah, so we, we charge businesses like a
monthly rate. We haven't precisely figured
out what that is we've, we've, right now we're free
for the few hundred companies
we're in right now. But we're looking to probably
do a monthly something. How much do you think a business will be
willing to pay? We think certainly 10 to
$15,000 a month. Okay so, so anyway could you
tell me a little bit about your team and who you
have working on this. yeah, there's we have five
founders technically I'm the only one who's full time
right now the, we're raising money so we can
get, you know, the rest of the team on board
yeah. That's this. Or can any of the founders
program, or, or. yeah, yeah. I mean we have, I mean one of
them is a bio PhD but he's like he's really picked
up coding. the, the. I mean, I'm a Python
developer, I did learn Python the hard
way. Oh, look at the time. Well, it's been really great
meeting you. Please keep me in the loop,
this sounds fantastic. [CROSS-TALK]. I'll send you an update. Great.
That was awful. So let's just go through, so. That was obviously not strong. So let's just talk about some
of the mistakes. So first of all, you need to make sure the person you're
talking to knows what you do. This just seems really simple,
but it's not. Yeah, this seems simple, but
it's not. So many times, people get
flustered. They get nervous, and they
start talking really fast. And there's no way you're ever
going to convince anyone of anything if they don't know, even what your app actually
is. You have to know your numbers
obviously. If you're very vague or evasive, like don't even have
the meeting. If you don't feel comfortable
telling an investor what your numbers are, don't even meet
with them. It means you're not ready yet,
right? For market size, try to give
some plausible bottom-up analysis and don't just
name-drop big companies that aren't even really related to
what you're doing. People tend to do that a lot. Try to have insights, try to
convince me that there's something that I don't already
know about the market that I learn talking to you, rather
than just what everyone knows about what
the market is. Right, I learned nothing
during that particular pitch. also, the team's just like,
why are you working on this, why are you suited for it is a
good thing to do. And finally, like, he didn't drive the
conversation anywhere. Like, obviously that went
poorly, and he just let the conversation
just, like, flail around until I cut the
medium because we ran out of time as fast as I could. So anyway, that was, that was
not a good pitch. So let's, let's try that
again. Okay, all right. Let's do this. Okay.
All right Caspar, well so I understand you have
a company and can you, can you just tell me a little
about what you guys do. Yes.
So we're a messaging product. We allow, I mean that sounds
kind of vague, so what we allow you to do you to
do is essentially message a location. So when you walk into a Crate
and Barrel, you can send the Crate and
Barrel manager a message like hey there's puke in the
hallway. Or if you're in the airport,
I'm trying to find this specific gate because I'm not
at this airport, where is you know where's a
terminal for Virgin. Or if you're at Target, what
aisle. Okay, so is this a mobile app
or what how do I use it? Yeah, so on the consumer side
we have iOS Android app, but really getting consumers
to download apps is obviously
very difficult. Yeah.
I don't, I don't. In.
I don't usually just download apps. Yeah.
To send a message. [CROSS-TALK]. In, in most businesses we have
a called action, which says text the owner
directly. Oh. We've tested actually a bunch
of copy that works the best in
small print. We have, the messages are
anonymous, they also lowers the barrier
to entry. I think the most
counterintuitive thing we've learned in the kind of launch
that we've had where, in 350 locations in the Bay,
we've been doing this for about three months we're about
11% weekly growth rate in terms of
acquiring businesses. But the most counter-intuitive
thing that we learned, because we weren't actually
sure, is, will people send messages
when they walk into [CROSS-TALK] and they do. What's the number one type of
message that people send? So you would, so originally, we started this product off
thinking this is going to be, like, in-location feedback. That was the premise,
in-location feedback. What we found is more than
half the messages, are actually not about
feedback at all, they ask things like we, we were in this location in
San Jose this Kabob stand, father and son, it's just a
take out place, and we saw messages that go
through, that went through that said
like are you hiring? And that's like very strange
because you would think like why wouldn't
you just ask the owner. Yeah.
But we realized that we know this is the owner, and the person who's walking in
doesn't and so they, they do prefer to
actually just text the owner because they think that's a,
that's an easier medium. Okay, so it's like a
suggestion box, or it's like a way to just like
message a business. Yeah, initially that's what we
thought it was, but what we actually discovered
was the vast majority, I shouldn't say vast majority,
over half the messages are actually just
things like when do you open, when do you close because
that's not on Google. Do you, do, you know, are you
catering can you, do you have any reservations
available tonight, et cetera. Okay, okay.
Well, look, in terms of your traction it sounds like you said you had
some businesses, like. Yeah.
Tell me about what, what you guys have right now. So we have about 350
businesses, all from San Jose to San
Francisco. We sold them ourselves as
three founders. We're all technical, but we
actually did all the sales because we learned a lot about
how these businesses work. We actually come from a retail
background. We originally built this
product for large enterprise players like
Starbucks and Walmart. But we recognize that closing
those contracts, and our limited amount of runway
wouldn't really be possible. So we wanted to get the
product in the hands of users. So we did SMBs. And that's when we discovered
hey, this like, this messaging
product. >> Okay, okay, that sounds
interesting. It sounds like you have some
customers. >> Yes, so we get.
>> How, how could this be big though? Like, okay, maybe you can
100,000 customers. >> Yeah, so, in terms of like,
numbers, we, we see one and half messages on average per
location per day. That might not sound a lot,
but for a business, that's
skidding 30 messages. You take like a Yelp review or
a Google review. In a lifetime of visits, they
might get five or seven. So they're getting a, a huge
volume of messages relative to what they tend to experience
and they're private, so they're not public. So in terms of, how do we
actually make money, it's not, you know, frankly speaking, we don't have a very clear
answer there. The two paths are the SMB side
or the LCS side, the large
customer side. Large customers, we know from
our retail experience, just regular feedback tools
are 3 to 4 million per year, so a like a Sear's, where we
came from. SMBs we've tested with are
willing to pay $50 a month, so, I, I, you know, I
certainly I think this is. >> Okay.
>> This can be a large business, but, and there's
clear ways to make money, but. I could see, I could see that. Just a couple things like, can you tell me about your
distribution strategy and also just a little bit about
the team. >> Yeah.
So distribution so the thing that
we learned in selling to these SMBs is it's
really freaking hard. there, the formula LTV minus
CPA, lifetime value minus cost price acquisition in SMB is
never going to work out. Right.
>> And so we have two solutions. One is to go up market, like we originally planned,
the Starbucks or Walmarts or two is actually
essentially pair with consumer facing companies
Yelp, Google, Facebook. >> Have you been talking to
them, do they actually want to do
it? >> Yeah, so we've talked to
Google and Facebook we're meeting with
Yelp. What we're basically want to
do is every time you search for a business there
should be a message button. We want to get consumers in
the habit of knowing, they can send, essentially a
text message to any business. That can help us get broad
distribution. Our real vision is to become
kind of that infrastructure, that messaging infrastructure
between consumers and business. If that doesn't work, let's
say Google, Facebook, and Yelp don't want to give up
that valuable property. It's really an ad unit. >> Okay. >> we, we do want to sell this
as a feedback tool to large, large players. >> All right.
Can you tell me a little about the team? We're running low on, on time. >> Yeah, there's three of us. All technical. We Mike and I did a company
before. Sunny is an ex-Google
engineer. We come from retail. So and our first startup was a
failure. So, I don't know if that's
good or bad but, we've, we've worked
together and, yeah. We're all technical, we built
everything ourselves. And we sold everything
ourselves. >> Okay.
>> So we've already had a couple conversations with
your firm. We're raising 500,000 and 8.5
million convertible note. Of that 500, 250's committed
by Mike Mapels, Eli Gill, and Aiden Sinkit. And Mike with Floodgate is
willing to fill the round. We think your, you know, you particularly, you and your
firm can bring a lot to the team with your retail
experience. Is this something that's
interesting to you? >> Yeah, you know, I, I think
this is really interesting. I mean, I would need to talk
to a couple more folks on my side, but I do think this
this, this could be pretty big. >> Yes, since we've had a
couple conversations before and and we're certainly
willing to meet again, we are closing a round this
Friday. And so, certainly take time
and let, you know, and let, your other partners know. I'll be available between now
and Friday. I'll give you another call
before Friday. Before we close the round. But we'd love to actually see
you, see you in the round. >> Okay.
Well sounds good. I gotta go, but thanks for
talking to me. >> Great.
Thanks. Okay. All right,.
>> So very different class type of,
type of a conversation. >> Yeah, so do you have a
clicker. >> Yes.
>> So in terms of that one, you know, some key points here
is, try to actually tell a narrative that
makes sense to people. You notice there was
narratives there. He was talking about people,
how they really use it. Were able to tie it down to
the real world, which is good. He was able to demonstrate
insights, and actually tell me something I
didn't already know about the market, like, there were,
there were some tidbits there. It was more, it was more of a
collaborative meeting where it felt more like a conversation
than just like a, like I was interviewing him
about something in, in my opinion. He actually asked for money. And this is the other key
thing is at the end, you saw I could have easily
just been like, okay, gotta go. But he, he did talk about
fundraising as, as Michael mentioned. And he was able to provide all
the context and all the questions I would need to actually have a serious
conversation with him. If he was cagey about it or
shy about it, and not clear on the numbers,
that there's a very high, good chance that, you know, I
probably would have just ended the conversation, due to time
pressure. >> Yeah, it's interesting. And we, we sit on this side a
lot. You really, you can tell when
people are very passionate and know their business very, very
well. And that's what you have to
become. okay.
So closing thoughts here before we, what you want to do
after the meeting. Before we get into the Q&A. We're running a little short
on time. After the meeting, the first
thing, just like Tyler said in the
sales thing, follow up. This is, this is important. And anything other than a
check, or wired funds is a no. So if they say, we gotta keep
talking to partners, I assume that's a no. And so, you do want to put
some pressure. The way that you can do that
is get deal heat. Deal heat is just a term which
means there's a demand for your, to, to be in your round. This is the easiest way and an important way to actually
drive up price, et cetera. Due diligence on the
investors. So let's say you have that
500,000 raise for your seed round on the 8.5 million
like we used in this example. Due diligence investors. If you do find it, I, I do,
due diligence on adults, and I find, hey, he's actually not
a great investor. I can get Elaud, or Mike
Maples, or whoever to actually fill the
rest of the round. It's surprising to us, how many entrepreneurs don't
do this. You would, it's like, you would actually spend a lot
of time hiring somebody. You're selling a part of your
company to somebody, you should know who you're
selling it to. To make sure they, you know, they're the type of
people you think they are. And then last, know when to
stop. So some founders get so good
at fundraising they just want to do it all the time
because it's much easier to do than actually building the
company. >> Yeah, you think you can fundraising does not equal
success and just because. >> Yeah.
>> You fund-raise does not mean you succeeded and nobody
realizes that and I'm, we say this and we'll say
this now, but I'm sure everyone will still
equate fundraising with success and read about
someone's fundraising and assume that means they're
successful. >> Well my, my, my intuition
as to why this is the case is because a lot of
smart people their whole life, they've like, applied to good
schools and applied to good jobs, and they, they just
think fundraising is another like application they
can just kind of check off. And building a company is much
more ambiguous, but. Anyways, that's, that's the
session. I don't if we have time for,
oh. The edge is under, underlining, building your
company. Fundraising is not the goal. >> Can you guys just stick
around for a few minutes after, and
answer questions? >> Sure.
>> Yeah, we can do that. >> All right.
Thank you very much, that was great.
